How, and Why, Apple Overtook Microsoft

So yes, Apple's iPhone is like Microsoft's Windows. Both are hugely successful products that accounted for the bulk of their creator's profits. Microsoft was unwilling to threaten the enormous revenue it gets from Windows, and now that the focus of innovation has shifted away from PCs it has lost its dominance.

Will Apple make the same mistake? No. Its first attempt to one-up the iPhone was the iPad. For a while, it looked like it might succeed: iPad sales took off even faster than iPhone sales had. But then they plateaued, while the iPhone kept growing. Nice try, but no dice. The iPad is nice little business, but it won't eclipse the iPhone.

Next try: the Apple Watch. It's not out yet, so we don't know what will happen. But it's clear that this is Apple's next big move. This is not a hobby. They'll be putting all their weight behind the product line. It might flop or it might be another (multi-billion dollar) side business that lags behind the wild profitability of the iPhone.

Mr. Stewart ends with a quote from analyst Robert Cihra: “The question investors have is, what’s the next iPhone? There’s no obvious answer. It’s almost impossible to think of anything that will create a $140 billion business out of nothing.”

Well, maybe investors can't think of anything, but it's clear that Apple thinks the next iPhone will be wearables. And they sure as hell aren't killing promising products for fear of cannibalizing iPhone sales.

Lockout is one way of looking at it. Another way is that it gives them the ability to make things integrate extremely well. Seamless integration like Apple does is extremely difficult to achieve without complete control of the ecosystem.

> Not to mention, they were focusing on the design aspect of the devices themselves which others were not.

This is where Microsoft still falls hopelessly short. They make ugly, geeky looking hardware. Everything Apple makes looks and feels beautiful.

> It seems the iPhone is their meal ticket, if the iPhone eventually fizzles out, where will that leave Apple

I'm not sure which other phone I could buy that would integrate with the rest of the Apple ecosystem? Unless they lag really badly in whatever technical advances mobile phones make, this doesn't seem likely. Some people like myself don't keep buying iPhones because of its technical specifications.

IMO, Microsoft (and other handset makers) focused a lot of their energy on the enterprise market. Looking at screenshots of early handhelds show productivity as one of the "bullet points on the box."

Apple had the luxury of approaching the phone market from the other direction. They've spent several years making the iPod, that a consumer-oriented phone was a natural evolution of that. They also knew how to sell it.

I think Apple offers a big walled garden for computing.